Norway’s Sovereign Wealth Fund Loses $71 Billion in Q1

Norway’s sovereign wealth fund’s investment portfolio lost 4.9% during the first quarter of 2022—equal to more than $71 billion—as its market value fell to $1.275 trillion, due to market volatility caused by political turmoil around the globe. [Source]

“The first quarter has been characterized by geopolitical turbulence, which has also affected the markets,” Norges Bank Investment Management Deputy CEO Trond Grande said in a statement. NBIM is the arm of the Norwegian central bank that operates the fund. “The return was negative for both equities and fixed income, but positive for unlisted real state.” [Source]

The fund’s equity investments declined 5.2% during the quarter, and its fixed-income investments provided no hedge, losing 4.8% for the period. Unlisted renewable energy infrastructure investments also weighed down the fund, dropping 3.3% during the first three months of the year. Unlisted real estate investments, the lone bright spot for the fund, gained 4.1% during the quarter; however, they only account for 2.7% of the portfolio.

The fund said the krone strengthened against several major currencies during the quarter, and that currency movements contributed to a 171 billion kroner decrease in the fund’s value, while inflow into the fund totaled 141 billion kroner. As of March 31, 70.9% of the fund was invested in equities, 26.3% in fixed income, 2.7% in unlisted real estate, and 0.1% in unlisted renewable energy infrastructure.

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Despite the rough quarter, the fund managed to beat its benchmark index’s return by 0.66 percentage points, or 82 billion kroner. The fund’s investments are measured against a benchmark index set by Norway’s Ministry of Finance on the basis of FTSE Group indices and Bloomberg Fixed Income indices.

The results for the quarter were a sharp U-turn from the previous quarter, when the fund returned 4.59%, as well as from the quarter a year ago when the fund returned 4.02%. As of the end of March, the fund had annualized returns of 8.41% over the past 10 years, and 6.33% since its inception at the beginning of 1998.

The fund giant owns equity stakes in more than 9,000 companies worldwide, and on average, holds approximately 1.3% of all listed companies in the world. Meanwhile, its fixed-income investments are allocated bonds issued by governments and related institutions and securities issued by companies. Up to 30% of the fund can be invested in fixed income.

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Tags: First Quarter, Government Pension Fund Global, Norges Bank Investment Management, Norway, Sovereign Wealth Fund, Trond Grande, Volatility

Despite a significant rise in saving and investing among Black investors in the US since 2020 that has narrowed the racial gap slightly, only 58% of Black Americans own stocks, down from a peak of 74% 20 years ago, according to the 2022 Ariel-Schwab Black Investor Survey.

Stock market participation has also dropped sharply among white Americans, the survey found, with 63% of white Americans owning stocks, down from 71% in 2020 and a high of 86% in 2015. However, stock market participation among younger Black Americans is higher, with 68% of Black respondents younger than 40 actively investing, compared with 57% of white investors under 40.

The survey also found a 40% increase in money saved or invested by Black Americans to as much as $657 per month on average, from $393 in 2020. But the increase, which was driven by new investors, high earners, and investors under 40, was still well behind white Americans, who are saving and investing up to $857 per month.

According to a report on the survey’s findings from Ariel Investments and Charles Schwab, Black Americans’ attitude toward riskier investments such as cryptocurrencies evinced a lack of financial education. The survey found that 25% of Black Americans currently own cryptocurrency, compared with only 15% of white Americans. Black investors are less likely than white investors to think that cryptocurrencies are risky (68% vs. 73%), and are more likely than white investors to believe that cryptocurrencies are safe (33% vs. 18%) and regulated by the government (30% vs. 14%).

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“The confluence of low stock market participation, appetite for risky investment options, and alarming lack of knowledge about fundamental investing principles is a red flag about the critical need for greater investor education,” Mellody Hobson, co-CEO and President of Ariel Investments, said in a statement. “Many new and younger investors have never experienced market volatility like we’ve seen in the last couple years, and we have a responsibility to educate these new investors about the value of long-term investing to build wealth and achieve financial security.” [Source]

The report also says that Black Americans are less trusting of the stock market and financial institutions than white Americans are, which has led to many Black investors pulling out of the market.

“Since 2020, Black Americans who either have stopped investing or have never invested increasingly cite lack of trust in the stock market (36% vs. 29%), lack of trust in financial institutions (25% vs. 19%), and having had a bad investing experience (15% vs. 9%) as the reason,” says the report.

The survey also found that Black investors are more concerned about losing money than white investors: 56% of Black respondents cited the fear, compared with 46% of white investors. And Black Americans who are not invested are more likely than white Americans to cite a need to access to their money, excessive fees, and high stock prices as reasons not to invest.

The online survey was conducted by Helical Research among 2,057 Americans ages 18 and older with $50,000 or more household income in 2021. The average household income of Black and white participants was $99,000 and $106,000, respectively.